The Kazakhstan Contract Agency (KCA) Closed Joint Stock Company was formed under the Resolution of the Kazakhstan Government on Measures for Strengthening State Support of Local Manufacturers of 14 November 2002 and the Order of the State Property and Privatization Committee under the Finance Ministry issued in February 2003. 50% of the state holding of KCA made up the statutory capital of KazMunaiGaz National Company. As readers of our magazine are known to be interested in the Agency’s activity we asked Nurlybek Seidzhanovitch Imanbaev, its President, to answer some questions.

In Kazakhstan, there are many publications and much talk about the necessity of increasing the involvement of local companies in oil operations, since companies with the participation of foreign capital control the bulk of the commercial reserves of hydrocarbons. The main objective for establishing KCA was to ensure state support for local producers; could you tell us about the responsibilities of the agency?

The role of local enterprises in joint oil and gas projects has been in the spotlight for several years, in particular with regard to the need for a greater input of products, services and labour by Kazakhstani companies. These issues are closely linked to the implementation of state policy on utilizing local resources; therefore the decision to form our agency follows logically from the strategy for industrial and innovative development of Kazakhstan for 2003-2015.

International practice proves that there is a need to devise efficient mechanisms for increasing the participation of local companies in oil and gas operations. For example, 20 years ago when Great Britain, an industrially advanced country, started developing hydrocarbon fields in the North Sea together with American oil companies, its share was only 14%. Now it is over 80%.

Kazakhstan is starting to deal with these issues. Even though much attention is being paid to the development of the oil and gas sector, the emphasis is on the development of manufacturing. One concrete step in this direction was the establishment of several development institutions, which will promote foreign investment in these strategically important areas. Indeed, the oil and gas sector will be the driving force that will bring the processing and manufacturing sectors up to an internationally competitive level of production.

Therefore, we are currently facing a task that will be implemented in phases, and which will take a long time to complete. We have to create the conditions that will allow joint projects and operations with the involvement of domestic and foreign producers to be mutually beneficial. The agency is currently drawing up detailed 3-5 year plans for utilizing local resources in all sectors of the economy.

What are the main functions of the Kazakhstan Contract Agency?

I would like to focus on the most pressing tasks in the wide range that was laid down for the agency when it was founded. Firstly, KCA, as an official representative of the Kazakhstan Government, intends to provide highly professional and modern services to local companies and foreign investors aimed at coordinating and promoting their mutual interests. We are going to introduce the latest technology, set international quality standards in the Kazakhstani market and utilize modern contract systems.

The agency envisages the creation of an integrated registry of domestic manufacturers and foreign investors, which would be on a level with overseas counterparts in terms of usefulness and operability. We are planning to develop a system for generating reports on the use of local resources (volume and status) by joint ventures. A monitoring system will be used for controlling the fulfilment of existing contracts on operations under PSA and other joint projects.

It is well known that foreign companies operating in Kazakhstan are reluctant to purchase products and services from domestic companies. They claim that these products fail to meet international standards. How are you planning to resolve this problem?

A consultancy centre is currently being set up under the agency, with the aim of harmonizing GOST and SNiP (construction norms and regulations) standards with international ones. KCA will assist Kazakhstani enterprises and institutions in acquiring international quality certificates such as ISO and API. In addition, we offer seminars and training courses with the aim of transferring the experience of international suppliers of products and services in pre-qualification procedures and tenders.

The current law in Kazakhstan does not even define the term ‘local participation’, nor the exact ratio between local and imported goods and services. Is it planned to improve the regulatory frameworks?

KCA considers participation in the improvement of legal and regulatory frameworks for the use of mineral resources, in particular those concerning the use of local resources in investment and innovation projects, to be one of its major strategic activities.

I would like to emphasize that any amendments to Kazakhstani law will only affect future mining contracts. The stability of contracts already made will not be violated. However, KCA’s main principle for building interactions between the Kazakhstani manufacturers and foreign investors will be: “Moving from compromise towards a consensus of interest”. I hope that this principle will help us to achieve our major goal: the development of the manufacturing sector in Kazakhstan and the use of local resources to the maximum extent. I am sure that this, in turn, will promote the best interests of foreign investors.

Finally, I would like to wish all readers of magazine the greatest success.